"Perhaps the sentiments put forth here are not yet sufficiently fashionable to procure them general favor. A long habit of not thinking a thing wrong gives it a superficial appearance of being right, and raises at first a formidable outcry in defense of custom. But the tumult soon subsides. Time makes more converts than reason."
--Thomas Paine

Sunday, June 28, 2015

Charlie Baker, the very popular Republican Governor of Massachusetts stumbled last week. When asked what he thought about the confederate flag flying over the capitol in South Carolina, Baker fell into the trap of suggesting that flying the flag was a matter of local choice and tradition. After friends asked him what on earth he was thinking, Baker made no bones about it: he apologized for his comments.

Baker did not walk back his remarks to be politically correct. Rather, it was his original comments that picked up on Republican Party talking points pandering to "conservatives" in South Carolina and the base of the Republican Party that were the hallmark of political correctness. Political correctness dominates politics during presidential primary seasons. Hillary Clinton, for example, a long-time supporter of global free trade agreements, sat mute on the sidelines during the recent vitriolic debate over providing fast track trade negotiation authority to President Obama in order to avoid raising the hackles of union members and Democrat voters on the left. Since formally entering the fray, Hillary has done her best to channel Elizabeth Warren and tamp down her ties to Wall Street and defense hawk credentials, despite the fact that she faces no material threat to her nomination.

Baker was not alone in wondering how it was that he found himself defending something that John McCain famously described as "a symbol of racism and slavery." Jeb Bush, whose political roots are similar to Baker's, was also caught flat-footed by the issue. The scion of a New England Republican family with strong civil rights bona fides, Bush removed the confederate flag from the capitol in Tallahassee early in his first term as governor of Florida, only to embrace the same talking points that tripped up Baker. A Fox News commentator made news when she tried to bail out flailing Republican candidates by suggesting that they had no obligation to address the issue at all, as the confederate flag was historically the banner of southern Democrats, who for a century or more stood in opposition to the GOP, itself the party of Abraham Lincoln and northern abolitionists.

And so it was, until Richard Nixon changed the face of the modern Republican Party.

Few recall in the prevailing political climate that the seminal legislation of the civil rights era drew greater support from the Republican Party than the Democratic Party. While the Civil Rights Act of 1964 and the Voting Rights Act of 1965 are largely identified with Democrat President Lyndon Johnson, it was the Democratic Party at the time that tried to block both pieces of legislation and the Republican Party that voted in overwhelming numbers for their passage. When the Civil Rights Act finally reached the floor of the US Senate in 1964--after a long Democrat filibuster--it was supported by 82% of Senate Republicans, compared with two-thirds of the Senate Democrats. When the Voting Rights Act came to the floor a year later, 94% of Republicans supported the bill, against a far smaller majority of Democrats.

In that era, the Republican Party had strong support among black voters. In 1944 and 1948, the Republican Party presidential candidate Thomas Dewey had a strong civil rights record, at a time when the Democratic Party was deeply split on the issue. In 1956--two years after the landmark Supreme Court decision in Brown vs. Board of Education--Dwight Eisenhower won 39% of the non-white vote in his reelection campaign against Adlai Stevenson. Four years later, in the last presidential election before the Civil Rights Act came to the floor of the US Senate, Eisenhower's Vice President Richard Nixon won 32% of the non-white vote.

The popular vote in the 1960 presidential race was split 50-50 between Nixon and John Kennedy. To this day, many contend that Nixon may well have won that election and that the margin of victory turned on Election Day dirty tricks orchestrated by the Kennedy political machine. Whatever the truth of those claims, Nixon left that election determined to make sure that his next race for the White House would not be so close.

In the wake of his narrow election loss in 1960, Nixon and his advisors crafted the "Southern Strategy" to bring southern Democrats disaffected by the Democratic Party's embrace of civil rights to the Republican Party. Nixon essentially traded away the New England Republican Party--with its long historical commitment to civil rights--for the disaffected south by embracing racially targeted and divisive tactics. In terms of the Electoral College, the trade was an easy bet. The Republican Party picked up a solid advantage in winning over 150 electoral votes across the south, while ceding its historical advantage with respect to the 60 or so electoral votes in New England and New York.

When Nixon won the presidency in 1968, his share of the non-white vote fell from 32% to 12%--a level that as been barely exceeded by any Republican presidential candidate in the ensuing half century. By 1972, the "solid south," long the cornerstone of the Democrats, was firmly in the Republican camp. For the ensuing half-century, the solid south has been the cornerstone of the modern Republican Party, and over the course of the past half-century many Republican politicians, who knew better, said and did things they knew they did not believe in.

The GOP did not have to continue down the path that Richard Nixon embraced in the wake of his loss to JFK in 1960. After Nixon resigned in the face of certain impeachment in 1974, GOP leaders could have reversed course, but they chose not to, presumably because they believed that the strategy was working. As this graph illustrates, the swap of the New England for the South was complete and has endured. As of 2014, there was not a single white Democrat in Congress from the deep south--though as Charlie Baker has demonstrated, the Massachusetts tradition of electing Republican governors has continued.

Over time, Republican electoral strategy migrated from overt racial tactics to the use of code and "dog whistles" to garner electoral support of its targeted voters, and wedge strategies to use hot-button political issues to drive voter turnout. Years later, prominent GOP political strategist and South Carolinian Lee Atwater described the evolution of the Southern Strategy from overt to covert racial tactics.

''You start out in 1954 by saying, 'N-----, n-----, n-----.' By 1968 you can't say 'n-----'. That hurts you. Backfires. So you say stuff like forced busing, states' rights and all that stuff. You're getting so abstract now [that] you're talking about cutting taxes, and all these things you're talking about are totally economic things and a byproduct of them is [that] blacks get hurt worse than whites…. You follow me? Because obviously sitting around saying, 'We want to cut this,' is much more abstract than even the busing thing, and a hell of a lot more abstract than 'N-----, n-----.'''

For years, Republican candidates and strategists have criticized leaders of the African American community and black voters for their loyalty to the Democratic Party, yet they rarely acknowledge that black voters were pushed out of the Republican Party as much as they may have been attracted to the Democrats. Ten years ago, Republican National Committee Chairman Ken Mehlman spoke before the national convention of the NAACP and apologized for the decades-old GOP strategy of leveraging racial polarization to its political advantage. But Mehlman's comments were neither widely applauded nor adopted as talking points across the party of which he was a leader.

Events in South Carolina over the past two weeks have demonstrated that the racially-targeted political strategy that Richard Nixon set in motion to assure his own electoral victory fifty years ago remains deeply ingrained in the GOP, Mehlman's apology notwithstanding. South Carolina Governor Nikki Haley has been widely applauded for her leadership in enabling GOP leaders to recognize that the time had come to confront the issue of the confederate flag. However, Charlie Baker's apology and Haley's leadership on the flag issue should not mask the reality that the essence of the Southern Strategy strategy--as exemplified in tactics ranging from voter suppression to Donald Trump's eloquent characterization of Mexican immigrants as criminals and rapists--remains alive and well. While Republican leaders and pundits are congratulating Haley for her leadership in tackling the flag issue, they have remained silent on the enduring implications of its fifty-year long racially-focused political strategy that has been and remains so important to the GOP success.

Monday, June 22, 2015

Three weeks ago, the long-time presumptive front-runner for the Republican Party nomination for President had reached a new low. Based on a Quinnipiac University national poll published on May 28th, the Republican primary contest was a dead heat, with five candidates--Jeb Bush, Florida Senator Marco Rubio, Wisconsin Governor Scott Walker, former Arkansas Governor Mike Huckabee and Johns Hopkins pediatric neurosurgeon Ben Carson--each polling at 10%.

Bush's decline from top dog corresponded with his difficulty responding to questions about the Iraq War and global warming, leaving him looking tentative, surly and unprepared. The man who was determined to run a positive and joyful campaign, and not to pander to the Republican base, was succeeding in doing neither.

Then last week he formally declared his candidacy and somehow he got his mojo back. His presentation was crisp. There was a new bounce in his step. All of a sudden--as confirmed by a subsequent Wall Street Journal/NBC News poll--he was looking once again like a presumptive nominee.

This is who Jeb Bush was supposed to be. His father's son more than his brother's brother. More Jim Baker, less Dick Cheney. A serious and thoughtful candidate who would stand out as an adult among children. As Bush went on offense, he convincingly painted his erstwhile protege--and the other frontrunner in the WSJ/NBC poll--Marco Rubio as a one term Senator with no executive experience. Scott Walker--the tentative candidate of the Koch Brothers wing of the party--similarly looked over-matched. And if Bush is truly back, it should mark the end the budding candidacy of Ohio Governor John Kasich and put a final nail in the casket of New Jersey Governor Chris Christie.

All of a sudden, it was beginning to look like the Republican battle would boil down to what it was long predicted to be: a race between Jeb Bush and a conservative candidate to be named later--with Texas Senator Ted Cruz emerging from a conservative confab last week as the new leading horse. A Bush candidacy would change the presumed dynamics of the 2016 race, as Bush--a convert to Catholicism, fluent in Spanish, husband to a naturalized Mexican wife and father to three Latino children--has the potential to garner significant support among Hispanic voters.

Then, just a day after Bush threw his hat in the ring, Donald Trump followed suit and lost no time making trouble. A mojordomo of the birther movement, Trump immediately upended Jeb Bush's fluent outreach to Latino voters when he brought pandering to the anti-immigrant base of the Republican Party to new heights, proclaiming in his campaign announcement speech that Mexican immigrants are "bringing drugs, they're bringing crime. They're rapists and some, I assume, are good people." Trump may or may not ever become a serious factor in the Republican race, but his offensive language was a reminder that for the past half-century, racially charged rhetoric has been an essential part of the national GOP playbook.

Dylann Roof's cold blooded murder of nine black churchgoers in Charleston two days later left GOP candidates outdoing each other in their embarrassing efforts to express outrage at Roof's racist attack while not insulting evangelical and conservative Republican primary voters whom they seem to presume have some degree of sympathy for Roof's white supremacist cause. Instead of castigating Trump for his disgraceful words two days earlier or demonstrating any semblance of moral leadership, the Republican presidential candidates fell all over themselves trying to avoid labeling Roof for what he was, bringing to mind the words of W.E.B Debois a century ago.

"We stand again to look America squarely in the face and call a spade a spade. We sing: This country of ours, despite all its better souls have done and dreamed, is yet a shameful land."

This has been a test for Jeb Bush. From the outset of his campaign, Bush suggested that if he decided to run for the presidency, he would run on his principles and beliefs and not pander to the Republican base. He would only run--and could only demonstrate his capacity to lead the nation as a whole--if he was prepared to lose the primaries. Yet in this critical moment, he failed to stand on principle. In a carefully worded press release, Bush pointed to his own removal of the confederate flag from the state house in Tallahassee as an indication of his "position on how to address" the issue, but offered no view on what should be done in South Carolina. Instead, Bush suggested that he was "confident" that--despite decades of evidence to the contrary--leaders in South Carolina "will do the right thing."

We have been down this road before. Fifteen years ago, in a defining moment of that political race, George W. Bush used the same formulation that Jeb has now adopted when he defeated John McCain in the South Carolina primary en route to winning the presidency. After McCain angered local voters by suggesting that the confederate flag was "a symbol of racism and slavery," W. suggested instead that flying the confederate flag was a state issue, even as he suggested obliquely that it was something that local leaders were "working to address."

There can be no doubt that both Bush brothers--raised as they were in a family of New England Republicans with a long history of commitment to civil rights--agree with McCain and view the confederate flag as a symbol of racism and slavery. This had to be a moment that Jeb and his advisors anticipated. No one would have foreseen the Dylann Roof's murders, but the confederate flag continues to fly over the South Carolina capitol, and it will be a political issue as long as it does. It loomed to be for him, as it was for his brother, a moment when he would have to choose between standing up for principle or opting for political self-interest.

It has been barely a week since Jeb Bush announced his candidacy. Now the questions once again revolve around what he actually stands for. A month ago, his campaign foundered on the question of his relationship with his brother, his brother's policies, and his brother's politics. This week he had one good day, but since then it has been downhill. This was a moment of simple moral clarity. If he was prepared--as he claimed--to take on the worst elements of his party, this was the moment to do it. Choosing not to do so may improve his viability in the Republican primaries--as it did for his brother before him--but it will surely cost him in the general election. And he knew that. He knew he was at a fork in the road, and he knew what the right path was. He just chose not to take it.

Saturday, June 06, 2015

Just imagine what Michael Lewis must think of the FIFA scandal. Although Michael Lewis is a prolific non-fiction author who has written about the misdeeds and abuses of Wall Street for a quarter of a century, he has never seen the highest law enforcement officials in the land throw the book at Wall Street as they did last week at the world soccer organization known as FIFA.

Lewis first burst on the scene twenty-five years ago when he published Liar’s Poker. Liar’s Poker described the world of bond trading and the development of mortgage-backed securities at Salomon Brothers where Lewis worked. Salomon Brothers was the gorilla on Wall Street back then, before collapsing in ignominy in the wake of its failed effort to rig the Treasury auction. But mortgage-backed securities lived on, and ultimately morphed into the complex securities that brought the world financial system to its knees in 2008.

Lewis has been a prolific author since leaving Salomon Brothers. He is most famous for Moneyball, his story about the Oakland Athletics that introduced the then-arcane world of statistical analysis to the average baseball fan, and ultimately to the world of sports as a whole. But he always returned to finance. The Big Short described aspects of the 2008 financial collapse in language the average reader could understand. Flash Boys shed light on the systemic corruption of the US stock markets that allows a select group of investors to front-run the rest of us, padding their pockets with our retirement savings.

When Attorney General Loretta Lynch stood before the world and brought the hammer down on the leaders of FIFA, Lewis surely must have looked on with incredulity. After all, the racketeering, money-laundering and wire fraud charges levied against a global assortment of FIFA luminaries was the product of a prosecutor armed with the resources of the FBI slowly working up the chain of command. First they turned American FIFA executive Chuck Blazer, then they followed him around the world, picking up one bad actor after another until the Godfather himself, FIFA President Sepp Blatter stepped aside. Surely if the US Department of Justice and the FBI could bring down FIFA, they could have exacted some degree of retribution from those who brought the world's financial system to it knees.

It is hard for many Americans to grasp what is going on here. First of all, we don’t even call it football like the rest of the world. But more to the point, most of us have never heard of Sepp Blatter, despite his being a global celebrity of sorts. But FIFA is a non-profit organization with $1.5 billion in financial reserves that is largely funded by American money. It is the point of access for advertisers wanting to reach the largest sporting audience in the world, and most of the leading advertisers are American companies. Roger Bennett, a British football journalist whose daily soccer podcast on ESPN, Men in Blazers, is essential listening for this scandal, put it succinctly the other day:

"McDonald's. Budweiser. Visa. Coke. When those massive American-based, global, multi-nationals are embarrassed, and suddenly their brands are linked to corruption, to bribery, to fraud, to the 1,200 deaths of essentially slave workers building the stadiums in Qatar. FIFA had to take action. And that action involves money, because that's the only language that FIFA understands. We've always said it had to be America that took FIFA down."

But really the credit should go to Andrew Jennings, the British journalist whose book Foul!: the Secret World of Fifa; Bribes, Vote Rigging and Ticket Scandalsprovidedaroadmap for the FBI and Lynch to follow. And follow it they did. When Roger Bennett asked why the US Department of Justice was leading the charge against FIFA, ESPN investigative reporter and anchor Bob Ley summed it up: "Because the banking laws of the United States have been trifled with."

Which of course brings it all back to Michael Lewis, who has spent a quarter of a century chronicling nothing if not the trifling with the banking laws of the United States.

I get the din of bribery and corruption that swirls around FIFA. It is what happens when money and power meet. And some of it is simply comical. Jeffrey Webb, one of the indicted co-conspirators accused of taking millions of dollars in bribes in return for his vote as the FIFA delegate from the Cayman Islands describes himself as one of the leading bankers in the Cayman Islands. Really? A Cayman Islands banker? Is that not business card code for money laundering?

And then there is Sepp Blatter himself speaking to students at Oxford two years ago: "Perhaps you think I am a ruthless parasite sucking the lifeblood out of the world and out of football—the Godfather of the FIFA gravy train. There are those who will tell you that FIFA is just a conspiracy, a scam, accountable to nobody. There are those who will tell you of the supposed sordid secrets that lie deep in our Bond villain headquarters in the hills above Zurich." How hard would it be to imagine Blatter's words spoken by Lloyd Blankfein, the CEO of Goldman Sachs, the original "great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money," as journalist Matt Taibbi suggested, who, like Lewis, must be wondering why the FBI has never called. Lewis, after all, laid out a similar roadmap, providing the names, the dates, the systemic fraud and corruption.

I get that many people find it hard to believe South Africa Sports Minister Fikile Mbalula when he denies that the six million dollars that South Africa paid to Jeffrey Webb and several others was a bribe to secure their support for South Africa’s bid for the 2010 World Cup. But many people also find it hard to believe that bankers Lewis described in The Big Short who deliberately designed securities to fail before selling them to clients did not similarly commit some manner of indictable offense. And many other people find it hard to believe that when the New York Stock Exchange sold access to hedge funds that enabled them to front-run average investors, none of those officials went to jail either.

Attorney General Loretta Lynch and her FBI colleagues have done their job. They have painstakingly followed the roadmap from the bottom of a corrupt global conspiracy to the top. That is a good thing. It is only their choice of which corrupt global conspiracy to tackle that seems curious.

Goldman Sachs—and I am only using Goldman as a metaphor for Wall Street—never bribed Jeffrey Webb, or at least I am not aware of any allegation that they did. But Goldman Sachs has put its money to good use, and perhaps better use than the FIFA leadership. Over the past decade, Goldman Sachs—once again, Goldman is just shorthand for the entire financial services industry—paid out almost six billion dollars in political contributions to members of the US Congress over the past decade. Those contributions were surely made with some idea of what was expected in return, and to ensure that their interests were represented at the highest levels of the US government.

Blatter has offered the typical CEO defense of the bribery and corruption rife within his organization. "I can't monitor everyone all of the time." But then he went further and suggested a credo that we have never heard from the leaders of our own banking industry in the wake of one scandal after another, one multi-billion fine after another. "We cannot allow the reputation of football and FIFA to be dragged through the mud any longer. It has to stop here and now." And then he did what no one did in the wake of the global financial collapse. He resigned.

The prosecution of FIFA came about because a journalist laid out a roadmap, and a prosecutor and the FBI picked up that roadmap and chose to follow it. The determination that Atttorney General Lynch has shown in her pursuit of wrongdoing at FIFA raises the question of why misdeeds on Wall Street were never pursued with similar zeal. Perhaps the roadmap that Michael Lewis laid out is not as compelling, or perhaps the culprits on Wall Street were simply better at playing the game and covering their tracks. Two years ago, Sepp Blatter described FIFA to students at Oxford as a conspiracy, a scam, accountable to nobody, words that many might apply to what Wall Street has become. It is all well and good that the US Justice Department has decided to police the rest of the world; it does beg the question as to why they have not been playing the same role here at home.